[Part 2] Forward to the new normal: States of transition

As U.S. states work to reopen their economies it’s no surprise there is a balancing act that must go on to protect both economic revenue and individuals’ health.

As I watch my state go through this, as well as others, I see careful industry-by-industry opening and health criteria being released as well as watchful eyes on infection rates and trends.

This is all good and I commend the hard work being done by those thrust into the unknown of getting an entire state back up and running.

However, I do see a gap. A gap that could diminish the effects of all this hard work.

A gap of not having a holistic State Economy Scorecard developed and implemented so that unforeseen consequences don’t appear to pop up overnight causing confusion, frustration, and stoppages.

What is a State Economy Scorecard?

To get there, we have to look at the original Balanced Scorecard created by Harvard Business School’s Robert Kaplan and David Norton. They recognized that a singular focus on cost, usually THE top concern of business, is often detrimental to true business growth and continuing improvement. This is often, and unfortunately, still the case. The Balanced Scorecard approach takes a holistic look across an entire business. It makes use of critical, interconnected metrics, not just financials, to evaluate business performance, health, and risk.

Visibility enabled by this wide view of business makes it easier to spot approaching problems before they become all-hands on deck emergencies.

In current reopening plans, there exists a focus on infection rates and death percentages, social distancing, and PPE use. This focus is absolutely needed. But while absolutely necessary, it is not sufficient in and of itself. Viewing an entire state’s economic systems and making sure risk indicators show where trouble may be brewing requires more than just a health focus to reopening an economy.

Luckily, all the hard work done to date can be used to steer development of the rest of a state’s economy scorecard because, everything is connected.

The original scorecard had 4 categories: Financial, Internal Business Processes, the Customer, and Knowledge/Education/Growth. While great for business, these categories need adjusting for a state economy.

Below are my 4 proposed strategic categories:

• Health

What is it? This category talks directly to survival.

While we currently think of health in terms of human health, this is a much broader category and is also an aspect of most crises. In addition to Covid19 and human health, think of hurricane Katrina, massive wildfires in the west, coal mining slag and contaminants breaching into fresh water streams, PFOE contamination, changing weather patterns and the health of existing ecosystems. All of these are directly or indirectly connected with human health. Most crises have a combination of interconnected health issues. States need to strategically identify types of health crises that would significantly and negatively impact the state’s economic outlook and set up metrics for monitoring.

 

For example, Australia’s Great Barrier Reef is in trouble. Economically, it is important for research and tourism as well as fishing, medicines, air quality, and erosion control for beaches.  While Australia is not a U.S. state, this example shows how human activity and business profitability is intertwined with the health of the environmental. To keep business and state economic conditions healthy, the barrier reef must be healthy so more tourists take tours to see a flourishing reef, eat in local small business restaurants, stay in local bed and breakfasts, rent cars, buy travel clothing, and so on. The metric might be something like: Annual die off of reef, goal = 0%, Annual die off of reef, stretch goal = – 2% (meaning 2% of the reef is new/recovered, living, and healthy).

Using this method, adjustments can be made for the crisis at hand with temporary metrics that are removed once the crisis is over. For Covid19, the metrics are published and known, such as 14 days with continuous decreasing infection rates, decreasing Covid19 death rates, and increasing testing. The metrics are already being captured as: % drop in new infections over 14-day period from [two-week time period], % drop in deaths over 14-day period from [same two-week time period], rate of death compared to infection rate for [same two week period], % increase in testing, % no test available for those wanting tests.  Once the Covid19 crisis closes, due to available vaccine or other reason, then these specific, temporary, crisis metrics can be removed from the scorecard. The State Economy Scorecard’s permanent metrics will continue to monitor if something appears to be negatively affecting human health.

State created scorecards showcase what is important to the state at large. These also help businesses understand economic drivers the state wants to protect that in turn protects businesses and people.

As noted, health is the important aspect being closely monitored. State guidelines/orders are being adjusted to contain infection at this time. As states plan for reopening, there is more than just health that needs to be monitored.

 

• Infrastructure

What is it? This category talks directly to support, movement, connectivity, and systems.

Infrastructure requirements will vary per state due to the uniqueness of each state’s economy. New Hampshire with its heavy reliance on tourism has different infrastructure needs than Michigan or Ohio, traditionally heavy manufacturing states. Yes, Ohio and Michigan have lovely tourist locations and New Hampshire has successful manufacturing.  However, due to a state’s primary focus, systems and infrastructure are put in place to enhance and increase growth in each state’s specific, chosen, economic driver. Systems will also be managed based on the service levels promised by a state that citizens, businesses, and visitors expect.

Tourism metrics might include % of tourist areas served directly by modes of transportation without negatively affecting tourist experience. If people frequent a location due to its remoteness and quiet, then building a new airport close by would negatively affect tourism. Perhaps the metric could be % of travel requiring at least 10% more than the standard travel time to destination, which could point to crowded highways and the need for trains from where most travelers start to locations highly frequented. It may also support a state’s desire to build and showcase affordable, efficient use of advanced transportation systems that complement the tourist experience, location’s experience, and a state’s forward thinking.

Monitoring could include:

• Number of bridges rated below passing by the National Bridge Inventory
• % IT system integration across entire state government
• % of population having usable, affordable, 24/7 available high-speed home internet
• Number of hours public access downtime exceeded allowable goals during conversion from a manual to digital system

During reopening, the infrastructure category may include temporary metrics. Metrics are dependent on state economic priorities as well as desired early warnings in specific categories.

• On Time Delivery Percentage to end user which can include sub-components such as:
  • % of late deliveries to state businesses due to port congestion caused by crisis factors
  • % of last mile no delivery to state residents
  • % of small service companies (hair salons, breweries, restaurants, etc) unable to get product delivery due to spiked demand and being pushed out in favor of large deliveries elsewhere
• Measurement of gridlock on major highways causing delivery and pickup delays due to all industry opening at the same time
• % of businesses unable to place digital orders due to lack of internet service (including capacity limitations) as businesses reopen
• Time required to increase user base by x% over current system capacity without increasing service delays, ex: state unemployment systems
• Economics

What is it? This category talks directly to financial aspects of a state.

Economics is much larger than just financials. Economics talks to the whole of revenue, it’s movement, and resulting state level cost/benefit from decisions made. This becomes part of a state’s attractiveness feature when encouraging businesses to open or transfer in.

Metrics could include:

• state GDP increase over last year
• state unemployment numbers
• ranking of state skills sets available in citizen population and per region
• % of small businesses that receive VC funding
• % of state businesses with minority or woman leadership (C-level)
• poverty level per region
• income disparity per region
• comparison of childcare affordability by region
• % of needed childcare availability by region

 

Temporary metrics could include:

• amount of funding per region to allay [specific] circumstance due to crisis
  • later: benefit received by region due to funding compared to expected benefit
• increase in poverty levels directly related to crisis
• comparison of business priorities during crisis for businesses that survived vs those that did not

No matter what metrics are chosen for economics, the infrastructure, health, and our last critical category will be connected tightly to it. Gaps in one area will affect performance in another. The trick for state officials is to understand how to evaluate the data to get to the true root cause of a problem so that the right decisions, investments, and real time adjustments are made.

• Knowledge, Education, and Growth

What is this? This category is the only original Balanced Scorecard category that remains the same. It is also the one that is usually ignored, or cut out of budgets. Yet at the same time, it is the one that can drastically change the fortunes of a state.

Building of critical infrastructure to improve economic conditions using improved communication and integration cannot be done correctly without the necessary knowledge and education. Grants for skill development and infrastructure improvement need to be matched to the state’s growth plan (the economic master plan). In Part 1 of this series, training was a critical part of crisis billeting, which also enabled people with similar skill sets in different industries/businesses to share best practices throughout the state.

Growth and development metrics can be tracked with easy to understand dashboards allowing all state citizens and businesses to participate in building the state economy. New Hampshire will probably not become a manufacturing power house, but it can support its manufacturing entities with skill development grants that supports the state’s focus on outdoor tourism. For example: by providing grant help to become a B-Corp and then maintain the certification (training), the state becomes attractive to Millennials and Gen-Z’ers (economic health), supports the state’s GDP (economics), and protects the outdoor environment. This in turn attracts more like-minded industry (economics). Additionally, this type of investment also supports current commercial investment criteria expected by investors such as Blackrock.

In times of crisis, how is the knowledge and education delivered?

• online short courses, tutorial offerings, webinars to enhance skill development and mindset

What if states provide/support a platform that businesses would use to list online offerings? What if all states made grant monies available to laid off/furloughed individuals to receive 100% paid for skill development training? Normal metrics may look like these below with temporary crisis metrics focused on rapid development of specific skill sets.

• % of online skill set training desired by state employers available for different business maturity levels
• % improvement in [health, infrastructure, or economic metric] directly related to training
• Number of individuals that can be fully trained for xyz crisis within 30 days

Each metric links with metrics in other categories. All metrics are interconnected. Improvement made in one area that negatively affects another scorecard area is rapidly identified. This is what provides the holistic visibility as well as early warning signals.

All four areas of metrics are based on successfully fulfilling a state’s strategy. Temporary metrics are based on successfully surviving a crisis. Some crisis metrics may be designed ahead of time based on known crisis parameters while other crisis metrics are created in real time to handle the uniqueness of a specific crisis.

While the State Economy Scorecard may be developed for use during “normal” times, in all times it presents a set of levers to push and pull based on what must be done, in both “normal” and “non-normal” times.

The beauty of Balanced Scorecard use is that critical aspects across an entire economy are visible and monitored. While much easier to focus on just one thing, practically speaking, singular focus wastes time and money. Why? Because critical personnel are taken off crisis response and put on analysis of what went wrong or is going wrong in real time during a crisis. Things such as analysis of data should be planned into crisis response strategies. Trained data analysts (surge capacities enabled by the Part 1 billeting) review predetermined and crisis specific data then report results into predetermined state offices while critical leadership remains on task during the entire crisis. These same data analysts monitor the adjusted-for-crisis State Economy Scorecard to provide early warning and insight into what is happening in the state.

This helps businesses as well. A state’s economy can be monitored via an online portal in real time.  Small businesses that do not have the capability or capacity to do their own economic data analysis now have the same insights as larger businesses.

Visibility, transparency, real time access: all items that can be meaningfully provided with the right set of metrics chosen to monitor across entire economies. It is always more advantageous to look at complex items such as state reopening in combination (unified and holistic view) rather than in isolation (crisis metrics over here, traditional metrics there, this dept. measuring this while that dept. measures that with minimal if any collaboration).

Wider dissemination for use also means a state has many more eyes on what is happening compared to the number of eyes it can budget for.

As the saying goes: it takes a community.

 

Keywords and concepts: State Economy Scorecard, Balanced Scorecard, state reopening, metrics, risk, strategy, governmental strategy, economic planning, billeting, health, infrastructure, economic, knowledge, growth, learning

 Cynthia Kalina-Kaminsky, Ph.D. is the President of Process & Strategy Solutions  She helps tech, tech enabled, manufacturing and logistics companies of all sizes with growth, transition, and transformation.